Are Freight Brokers Necessary?

I think what some people don't account for is man-hours. Man-hours are a huge overhead in any business if it takes an hour of talking on the phone to 20 different carriers then that broker has just thrown an hour out the window. If you believe that brokers have no overhead do some research on man-hours alone and that accounts for a huge amount of it. There are actually people out there that will get paid to tell a business owner to move their copier 6 inches to the left to save 2 steps per employee per trip resulting in X amount of time per year saved and invested into other things. This is a very crude example but when you have large companies these things matter on a whole new level, but even to small companies it means something.

 

The smart ones never lease on to Landstar in the first place....

Actually you'd be surprised that the ones who do move on realize they can work for just as good or even better companies without all the excess deductions that Landstar seems to be plagued with.

 

BigBadBill is correct. There is a cost for load acquisition and customer retention. You can spend time making phone calls, quoting rates and booking your own freight or you could hire someone and pay them to find and book loads for you. Once you haul the load you will need to send an invoice to the shipper and follow up if you don't get your money in a timely manner. Or, you could use a broker to do everything for you. There are some brokers that I won't do business and others that I have a good working relationship.

I do think some take advantage of the rate, but it is still up to the guy with the authority to decide at what rate he is willing to haul a load of freight. You don't have to haul freight for $1.20/mile. You can learn better negotiating skills or just make up your mind that you won't move your truck for less than a certain rate. I think some still don't understand how this business operates. Everyone in business wants to pay as little as possible for the products they buy or services that they use. Brokers and shippers are no different. If they can get a carrier to move a load for $1.20, there is no reason for him to pay another carrier $3/mile to move the same load. Carriers have much more control over rates than they realize. A rate may start at $1.20/mile. If no one takes it the rate will continue to rise until someone takes it.

There is no reason to blame the broker for cheap rates. Blame your fellow owner operators or carriers. A rate isn't set until someone takes the load. Brokers can sell all the capacity they want, but unless the rate is sufficiently high or someone takes the load at a cheap rate the broker won't be able move the load or keep his customer.

I will mention something that I have discussed before. I think the broker/carrier/shipper dynamic is skewed. I would prefer the relationship to change where the broker works for the carrier in a relationship similar to that of a manufacturers rep. Rather than the shipper paying the broker their compensation comes directly from the carrier. A broker could represent a number of carriers, just like a manufacturers representative. His only job would be to handle sales. All fulfillment, billing, etc., would be the responsibility of the carrier. Now, that would mean that the carrier would have greater liability, but for those who want more control, this would be the means to do that. There would be no need for broker authority since the broker would be working for the carrier. I know it is a whimsical idea, but it could work. The problem would come in when some carriers might not handle paperwork as they should and not have the capitalization to pay the rep, or hire the office staff to do all that paperwork. It would then be the brokers who would be on here complaining about the carriers.

 

I find it odd that you believe O/O's or yourself to be the only spoke on the wheel here. There are plenty of very small businesses in this country that ship very small quantities of loads per day / week / month.

The mega fleets aren't going to mess with committing equipment and resources for 1 load a week, but those same mega fleets will grab it off a load board to get / keep their equipment moving.

How will you commit to a shipper that ships 1 load a week? Will you sit and wait for it? Will you expect payment while you sit around and wait?

Let's pretend in your perfect world that you sit and wait and the shipper pays big $$. Now you are on the other side of the country delivering it....Uh Oh the next load is ready to ship.....you're not there....Now what does the shipper do?!?!?! Wait for you to come back? Will you pay him to wait on you?!?! His customer is waiting on that product!! Do you know how to get that load moved?!?!?


The Broker does........

 

I appreciate the fact that you didn't take my comments personally, and also that you took the time to address each of my statements.

It's pretty clear that we disagree on many points, and it's also pretty clear that we're naturally on opposite sides of the fence experience-wise, which isn't surprising since you broker loads and I just move them.

What I'd like to point out is that my opinion is based entirely on my personal experience with both good and bad brokers, as well as my experience in dealing directly with my shippers to book my own loads.

As to good brokers, yes, obviously there are good ones out there. And the ones I have dealt with (and still do when I need to) work for a 10% or less cut of the load. The average has been right at that 10%.

As to bad ones, I've worked with them too and have been charged up to 25% of the load. Needless to say, this left a bad taste in my mouth, and I've yet to figure out why any broker needs to take that big a cut. I'm also savvy to the bad brokers who take even more but hide what they're actually getting of the original load price, and I avoid those people like the plague.

To be reasonable, I have to admit that if I was a broker, I would want to get a decent cut of the money involved, but at the same time, I think there's got to be a point at which enough is enough, and where taking more than what is actually fair for the services rendered is not only just greedy, it's detrimental to the clients who aren't able to get the full value for the services they render. I hope you get my drift there...

I also understand that there are operating costs associated with a brokerage, and I understated those costs intentionally. Just as I have had bad brokers understate my actual costs to move their freight. .....

My bad, I should have illustrated that as in making a point.

Honestly, I deal more with my customers directly than I do these days with any brokers, and I'm extremely picky about what brokers I will deal with.

I don't mind paying for a service that's rendered to me that has value, and I understand a really good broker is an asset when I need to find something to move and my direct customers aren't shipping.

Having said that, I still don't like paying for something I can, and do, on a regular basis with success, do for myself.

So, with me at least, it's not a matter of ignorance (as another poster insinuated,) it's a matter of wanting to maximize my bottom line by taking care of the load booking myself when I have the time and ability to do so.

And the biggest "off the top" expense I can do without is having to pay a broker.

So it's really nothing personal, and like I already said, I appreciate that you didn't take it that way.

It's just a matter of my experiences and my point of view.

As to the 30% turnover thing, yep, I did miss the finer points. Sorry 'bout that one.

 

Maybe mega carriers do a lot better in dealing with brokers in the first place due to the volume of freight they can and do move, and broker fees aren't such an overall big chunk of their pie.

They can also do better on fuel discounts, repairs, and tires and such than an independent O/O. So taking cheaper loads from a board can make more sense to them, where it doesn't necessarily add up to a profit for the independent O/O.

So comparing big carriers to independents is a lot like comparing apples and oranges in that sense. Big carriers can also cover a lot more turf logistically. That doesn't make what might be relevant to being a mega carrier necessarily relevant to an independent O/O.

I actually didn't say that O/Os are the only spoke in the wheel.

What I said was that most O/Os would be better off if they were able to deal directly with shippers and brokers got out of the way, and I stand by that opinion.

Which is not to say that I won't use brokers, I will, and do. But only as a last resort and for reasons I listed in another post which I don't really want to re-type here....

As to the other questions, I have to revert back to my original statement that an O/Os main reason to use any broker is to get a specific load at a specific rate when it's not available directly to the O/O.

If I'm in Cleveland and a load comes up in Dallas, obviously I can't be in two places at one time. So, of course the broker can get someone there who is able to take that particular load. The other side of that coin is that there has to be another O/O out there looking for that load for the broker to give it to.

Now, if the broker wasn't there to broker that load, would it just sit without anyone taking it? No, it would go to the other O/O who was out there looking anyway if the system in place allowed for more direct booking of loads by O/Os.

My opinion is not that brokers simply have no place or value. I realize that in certain circumstances they do.

My opinion is that brokers cause a lot of headaches and unnecessary expenses for independent O/Os that could be avoided if brokers weren't in the middle of the majority of the negotiations to move loads.

And guys, it's just my opinion, just like you'all have yours. It's probably not worth getting all worked up over....

 

Or the dog and I can move out, take alimony and child support (I can make a good argument for the dog being a child) and live without you whiney, baby truck-drivers!

 

I never realized how freight got moved before brokers ever came along.

If not for todays brokers freight would be palling up on shipping docks every where.

 

Well I can get all the discounts, and on tires do better, than many of the mega carriers. I think this applies more to any carrier that pays mileage base. If they are paying an O/O $1.40/mile with FSC, if all it takes is one call to book a load at a $1.41 or better to get the driver to contract freight then all is good.

Better for who? You? In most cases not the shipper. Think thru the process of what it takes to set-up a new carrier. That is ½ hour minimum. And that is after you have spent the time trying to find someone to take a load. Then add time for booking the appointments and tracking the load. When a shipper is working with a broker, maybe 5-mins to email or fax the load information and receive information on who is covering the load. Now multiple this by the number of loads that shipper has in a week. And we haven't even accounted for time when problems come up.

It seems what you are talking about is issues with bad brokers. They are like a weed that grows like a vine over your rose bush (good broker). Just because they cover over your rose bush does not mean the rose bush does not exist. You just have to cut out the weed to get to the roses and let them flourish.

A direct shipper with say 20 loads a week will be less efficient than working with a broker that handles that account plus a handle full of others. If that broker is a rose bush then the O/O should be able to get a better rate than working direct.

And the best way to get rid of the weeds is to educate shippers on the risks of working that type of broker and direct them to the roses. That I why I'm working on a campaign that educates shippers on the risks to them of not having a policy in place regarding rates, safety, insurance, etc. Most shippers are clueless to what is coming when a broker books the lowest priced carrier with poor CSA scores and that carrier gets in an accident. Past safety ratings shielded them from law suits. CSA now opens them up to it. And if they are using one of the weeds that has no contingent cargo or liability insurance, then they have no additional buffer between then and law suit. Lawyer fees are like round up, that weed will shrivel up and die long before the case ever gets to trial.

 

Brokers are not only in trucking I haul a lot of potatoes. One farm I pick up all the time from when they are harvesting sells every thing through a broker. They are a necessity. Its always up to the driver to say yes or no. I personally love to laugh at a guy who offers 800 for a 650 mile run but that's just me. I don't get mad about it though I just say no thanks and find one that pays 1400 instead. I run east coast (from florida to ny and I
haven't really had a hard time staying over 2 .00 for every mile I drive. I might take a 2000 load down(1100 miles) but that's because I'm getting a 3500 load on the way back. Just my 2cents